Big Blue back on track

The ever shrinking Big Blue’s moves to cloud and security services helped it beat analysts’ quarterly revenue estimates, and the technology major hinted at sales growth after nearly six years of declines.

Revenue from these businesses climbed 11 percent to $8.8 billion in the third quarter ended September 30, accounting for about 46 percent of the company’s total revenue.

IBM has been focusing on cloud, cybersecurity and data analytics, or what the company calls its “strategic imperatives”, to counter a slowdown in its legacy hardware and software businesses.

Revenue from the cognitive solutions business, which includes the AI-powered supercomputer Watson, rose nearly 4 percent to $4.40 billion, after falling 2.5 percent in the previous quarter.

Analysts on average expected revenue of $4.17 billion, according to financial data and analytics firm FactSet.

IBM said it expected revenue to grow $2.8 billion to $2.9 billion in fourth quarter from the third quarter.

This implies fourth-quarter revenue in the range of $22 billion to $22.1 billion, a year-on-year growth of about 1.4 percent at the high end.

A part of the rise in revenue is expected to come from the mainframe business, which got a boost from the launch of Z14.

Revenue in mainframe business jumped 60 percent in the third quarter, Chief Financial Officer Martin Schroeter adding that the business gained from Z14, which began shipping in mid-September.

“The progress around the mainframe contribution, signings growth/visibility in consulting and positive trends in cloud likely sets up for further momentum in Q4,” said David Holt, an analyst with CFRA.